Lesser Known Tax Benefits of Health Insurance You Must Know
Expert financial planners recommend a comprehensive health insurance policy at the core of your financial portfolio. Ideally, you should have adequate health cover for yourself as well as your family, even prior to saving for your life goals.
More importantly, the premium paid towards a health insurance policy qualifies for tax benefits – by bringing down the total taxable income, and therefore, your tax liability.
Stated below are lesser-known tax benefits of availing a health insurance policy:
Tax benefits on premium paid towards health insurance policy for parents
The premium paid towards your parents’ health insurance policy is eligible for tax deductions under Section 80D of the Income Tax Act, 1961. This tax benefit is also available on premiums paid towards health insurance for yourself, spouse, and children.
However, the amount of tax benefit varies according to the age of the insured. The maximum deduction that you can avail in a year amounts to Rs. 25,000 – considering the insured is not more than 60 years old. That being said, should premium be paid on a health insurance policy for parents who are senior citizens (aged 60 or more), the maximum deduction is capped at Rs. 50,000.
This implies that as a taxpayer, you can maximize tax benefits up to Rs. 75,000 as per Section 80D, considering you are below the age of 60 and your parents are above that mark. Also, in the rare case that you are above 60 and your parents are senior citizens as well, you’d be able to claim tax benefits of up to Rs.1 lakh within a financial year.
Tax benefits on premium paid towards riders in a life insurance policy
The tax benefits on offer – under Section 80D – are on the premium that you pay towards a health insurance policy. This follows that you aren’t obligated to buy a health insurance plan from a health insurance company only.
To put things in perspective, the premium that you shell out towards a critical illness rider (or other medical insurance riders) within a life insurance plan would qualify for tax deductions as per the same section. Further, should you buy a health insurance policy from a life insurance company, the premium that you pay towards such a policy would be eligible for the same tax benefits.
Tax benefits on health check-ups
Within the respective maximum limits of Rs. 25,000 and Rs. 50,000, a maximum deduction of Rs. 5,000 would be allowed on payment that you make towards preventive health check-ups for yourself, spouse, dependent children or parents.
For instance, if you pay a premium of Rs. 20,000 on your health insurance policy, and concurrently undergo a preventive health check-up worth Rs. 5,000, you’d be able to claim tax benefits for the entire amount (i.e. Rs.25,000) under Section 80D.
Moreover, both indemnity (individual health insurance policy, for instance) and defined benefit (such as a Daily Hospital Cash Plan) plans of a standalone health insurer would qualify for tax deductions.
Other lesser-known tax benefits
Besides the ones listed under Section 80D, other extensions to the Act have on offer tax benefits for individuals with special needs. These include:
Deductions under Sec 80DDB
Individuals diagnosed with specific afflictions – including cancer, Parkinson’s Disease and chronic renal failure – can claim tax benefits up to Rs. 2 lakh within that financial year.
Deductions under Sec 80DD
This is applicable for treatment of dependents with certain disabilities. Tax deductions are capped at Rs. 75,000, as per this section.
Deductions under Sec 80U
This is applicable for treatment of differently-abled individuals who can claim tax advantages up to Rs.75,000 within a financial year. However, one can claim tax benefits up to Rs. 1,25,000, in case of a severe disability.
In conclusion, health insurance benefits are aplenty; while it helps you secure a comprehensive health cover on one hand, it also serves to save your total tax outgo. In keeping with the rise in lifestyle disorders and increasing healthcare costs, it certainly makes good sense to invest in a health insurance policy on priority.